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This is Eric Wareham, Vice President of Government Affairs for WEDA and welcome to another edition of legislative landscape. In this edition, we are talking about recent Treasury guidance on PPP forgiveness, renewed interest in the right to repair movement, and how we are gearing up for an interesting 2021 legislative session.
The first issue to address is the recent Treasury guidance released reinforcing the IRS’s position that expenses paid with PPP loan funds will not be deductible if the loan is forgiven. Although the CARES Act that created the PPP loans specifically excluded loan forgiveness amounts from taxable income, the act was not crystal clear on how business expenses paid with loan proceeds would be treated. Despite the intent of Congress to make the loans non-taxable, this move from the IRS makes the loan forgiveness meaningless. This is a distressing issue for businesses engaged in tax planning decisions as we approach the end of the year, especially those businesses most impacted by COVID that are struggling to keep their doors open.
There is a slight hope that Congress will resolve this issue in favor of taxpayers by passing legislation before the end of the year clarifying that business expenses can be deducted. There is currently a bill, S. 3612, that has bi-partisan support from both chairman Grassley and ranking member Wyden of the Senate Finance Committee who co-signed a letter sent to Treasury telling them their interpretation was not the intent of Congress. If the legislation were to pass it would most likely be part of a larger phase IV relief package that has been negotiated in fits and starts for several months now.
Another Treasury guidance recently released is positive news for some pass-through entities. Going back to the Tax Cuts and Jobs Act passed in 2017, many of you will remember that one of the trade-offs for lowering the tax brackets was a cap on SALT, or state and local taxes, of $10,000. The overlooked problem at the time was the unequal treatment this created for pass-through entities such as S-corps and LLCs that were subject to the SALT cap while C-corps were not. Treasury recently cleared this matter up by stating pass-through entities that elect to be taxed at the entity level rather than at the individual or partnership level will not be limited on their SALT deductions. To carry this out, individual states are required to pass laws that enable pass-though owners to make this election. To date, only Oklahoma has passed legislation to allow this. WEDA is currently working with other states to make this tax choice available to businesses.
Now we turn to our Right to Repair roundup where since the election there has been increased attention brought to the issue both in the U.S. and Canada. Some of you may have read in our post-election analyses that an automotive right to repair ballot measure in Massachusetts passed by 50 points. The ballot measure, which created access to vehicle telematics data, became the most expensive in state history with nearly $50 million being spent between both sides. The overwhelming passage of that direct democracy initiative has emboldened right to repair advocates that see the victory as a mandate to push for right to repair laws throughout the country, including for farm equipment. I’ve written more in-depth about this in an upcoming WEDA magazine article.
Concurrent to the developments in the U.S., there has been renewed interest in Canada amongst producer groups to analyze the right to repair issue. Recently the Keystone Ag Producers in Manitoba requested a presentation about right to repair after the group passed a policy resolution to further research the issue and develop a recommendation. That presentation was given last week and sparked good conversation about the effects of rural broadband and workforce development on the ability for dealers to increase uptime for their customers. The dialogue is expected to continue and hopefully will lead to a dealer demonstration in Manitoba once conditions allow.
The final point in today’s podcast is about the upcoming 2021 legislative sessions. WEDA is gearing up for the start of new legislative sessions containing many new faces and certainly a new dynamic. It is anyone’s guess right now how state legislatures will proceed with their work under COVID restrictions. There are due process considerations as notice and comment requirements will have to be adhered to in some form or fashion, but it’s uncertain whether face-to-face meetings will be allowed anywhere. The other question is whether state legislatures will be solely focused on budget woes stemming from COVID or if policy legislation like right to repair will be considered. WEDA’s government affairs team is ready to adapt to whatever the circumstances provide much as all of you have in your businesses.
If there are any legislative issues you want addressed this session, be sure to contact me. With that, thanks for listening, and hope everyone is enjoying the holiday season!
Podcast By Eric Wareham
ERIC WAREHAM is the vice president of government affairs for the Western Equipment Dealers Association. He is a graduate of the Willamette University College of Law and Augusta State University. Eric may be reached by writing to firstname.lastname@example.org.